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We analyze the economic consequences of strategic delegation of the right to decide between public or private provision of governmental service and/or the authority to negotiate and renegotiate with the chosen service provider. Our model encompass both bureaucratic delegation from a government to a privatization agency and electoral delegation from voters to a government. We identify two powerfull effects of delegation when contracts are incomplete: The incentive effect increases the incentive part of service providers’ remuneration and we show that strategic delegation may substitute formal incentive contracts. The bargaining effect improves the bargaining position vis a vis a private firm with market power and leads to a lower price for the service. Outsourcing, Strategic Delegation, Incentives, Incomplete Contracting, Market Power, Representative Democracy.

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Previous work on board size effects in closely held corporations
has established a negative correlation between board size and firm performance.
We argue that this work has been incomplete in analysing the causal
relationship due to lack of ownership information and weak identification
strategies in simultanous equation analysis. In the present paper we reexamine
the causal relationship between board size and firm performance using a
dataset of more than 5,000 small and medium sized closely held corporations
with complete ownership information and detailed accounting data. We test
the potential endogeneity of board size by using a new instrument given by
the number of children of the founders of the firms. Our analysis shows that
board size can be taken as exogenous in the performance equation. Furthermore,
based on a flexible model specification we find that there is no
empirical evidence of adverse board size effects in the typical range of three
to six board members. Finally, we find a significantly negative board size
effect in the minority of closely held firms which have comparatively large
boards of seven or more members.

Boards are endogenously chosen institutions determined by observable
and unobservable firm characteristics. Empirical studies of large
publicly traded firms have successfully controlled for observable determinants of board size and shown a robust negative relationship between board size and firm performance. The evidence on smaller closely held firms is less clear; we argue that existing work has been incomplete in analyzing the causal relationship due to weak identification strategies. Using a rich data set of almost 6,000 small and medium-sized closely held corporations we provide a causal analysis of board size effects on firm performance using a novel instrument given by the number of children of the founders of the firms. First, we find no empirical evidence of adverse board size effects when the size of the board lies in the typical range for closely held corporations of three to six directors. Second, we find a significantly negative board size effect for the minority of closely held firms that are characterized by having comparatively large boards of seven or more members and non-complex operations.

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Abstract. Estimating the value of top managerial talent is a central topic of research that has attracted widespread attention from academics and practitioners. Yet, testing for the importance of chief executive officers (CEOs) on firm outcomes is challenging. In this paper we test for the impact of CEOs on performance by assessing the effect of (1) CEO deaths and (2) the death of CEOs immediate family members (spouse, parents, children, etc), which arguably affects CEOs focus. Using a unique dataset from Denmark, we find that CEO (but not board members ) own and family deaths are strongly correlated with declines in firm operating profitability, investment and sales growth. Our CEO shock-outcome analysis allows us to identify the shocks that are the most (least) meaningful for CEOs: the death of children and spouses (mothers-in-law). We show that individual CEO, firm and industry characteristics seem to affect the impact of these shocks. In particular, CEO effects are larger (lower) for longer-tenured (older) CEOs and for those managers with large investment fixed effects. CEO shocks are relevant across the size distribution of firms but are concentrated on those firms that invested heavily in the past. Lastly, we find that CEO shocks tend to be larger in rapid growth, high investment and R&D intensive industries. Overall, our findings demonstrate managers are a key determinant of firm performance.

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Economists have long acknowledged that the structure of the family (number of
offspring, marital status, etc.) plays a crucial role in important economic decisions (e.g.,
labor supply, demand patterns, portfolio choice, educational attainment). In this paper we
investigate the link between family structure and corporate decisions of family firms.
Even though there is considerable anecdotal evidence on this link, there is no systematic
study. This paper fills this gap. To this end, we assembled a unique dataset with
accounting information from 1995 to 2002 of the universe of privately held firms in
Denmark. Our dataset includes the family trees of the owners as well as personal
information about all family members. This information allows us to identify family
firms among privately held firms. We find that, using a 50% definition of control, 89%
of privately held firms are family firms. We focus on the decision whether to choose a
family member or an outsider as the next CEO. We show that the larger the pool of
potential heirs, the higher the probability of family transition. Also we document that this
probability is significantly lower when all offspring are female. Finally, family conflicts
(proxied by divorce or multiple marriages) reduce the probability of family transition. In
a robustness check we show that there is a causal effect from family structure to
corporate decisions. We do this by instrumentimg the number of children with sibling sex
composition and by restricting the sample to one in which founders had their last child
years before founding the firm.

This paper studies how interest group lobbying of the bureaucracy affects policy
outcomes and how it changes the legislature’s willingness to delegate decision-making
authority to the bureaucracy. We extend the standard model of delegation to account
for interest group influence during the implementation stage of policy and apply it
to different institutional structures of government. The paper addresses the following
questions: First, how does the decision to delegate change when the bureaucratic agent
is subject to external influence? What cost does this influence impose on the legislative
principal? Finally, how susceptible are policy choices to bureaucratic lobbying under
different government structures? In answering these questions, the paper seeks to provide
a comparative theory of lobbying and to explain the different patterns of interest
group activity across political systems.